Archive for the ‘Employment’ Category

The Second Coming of Henry Ford?

Thursday, August 7th, 2014

River-Rouge-PlantElon Musk apparently wants us to think of him as the second coming of Henry Ford. The CEO of electric carmaker Tesla Motors is planning to build a $5 billion, 6,500-worker battery “gigafactory” that is being likened to Ford’s legendary River Rouge complex in Dearborn, Michigan. Musk has a group of western states desperately competing for the project.

It remains to be seen whether the Tesla plant will rise to the level of Ford’s integrated industrial wonder (photo), which in the 1920s was the largest manufacturing site in the world. Yet the two facilities will have something in common: being built in part with taxpayer money. As Robert Lacey tells it in his 1986 book Ford: The Men and the Machine, Ford arranged for the federal government to pay $3.5 million for the deepening of the Rouge River and the draining of marshes at the plant site as part of the contract Ford had been granted to produce Eagle boats for the U.S. Navy.

Tesla has also received help from Uncle Sam — in the form of a $465 million loan it repaid last year — but now the company has its hand out to those states vying to be chosen for the gigafactory. It’s been understood for months that the winner of the competition would have to put serious money on the table, but now Musk has indicated exactly how much in the way of subsidies will be required: 10 percent of the cost of the plant, or about $500 million.

The company and its apologists insist that the demand is not excessive, noting that Volkswagen got a bit more for its assembly plant in Tennessee despite the fact that it is employing a lot fewer workers than Tesla promises. That’s true. Volkswagen got $554 million from state and local agencies, and that is far from the largest subsidy package ever awarded in the United States. In the Good Jobs First Megadeals compilation, it ranks 24th.

Yet such a comparison is problematic, because it is far from clear that the $500 million figure will be the total subsidy burden the winner of the Tesla auction would take on. In all likelihood, the $500 million would be only the up-front cost, while state and local governments would also probably have to offer long-term tax benefits that would end up being much more expensive.

This happens all the time. In the case of Volkswagen, public officials were initially mum about the estimated total size of the package, and it was only through reporting by the Chattanooga Times Free Press that the real costs came to light. By the way, VW is now getting $274 million more for a plant expansion.

Another egregious case of low-balling subsidy estimates happened in Mississippi, where officials initially put the cost of the package given to Nissan in 2000 at $295 million. Yet, as my colleague Kasia Tarczynska and I showed, when all was said and done, state and local agencies in the Magnolia State gave the carmaker subsidies worth more than $1.3 billion.

The odds that Tesla will seek to maximize its subsidy payoff are increased by the fact that it just announced a partnership with Panasonic. The Japanese company managed to extract a subsidy worth more than $100 million from New Jersey to move its North American headquarters a short distance.

Along with underestimated costs, there is a chance that projections about the Tesla project are overstating potential benefits. Particularly suspicious is the claim of 6,500 jobs. Given current manufacturing practices, a workforce of that size is highly unlikely. I can’t help but suspect that the number may include temporary construction jobs or supplier jobs. It’s worth noting that the heavily subsidized advanced battery projects in Michigan mostly created jobs only in the hundreds, the best case being the 1,000 positions created at A123 Systems before it went bankrupt.

And even if Tesla beats those figures, there’s the question of how good the jobs will be. The Japanese and German auto assembly transplants have had to set their wages close to those of the Detroit automakers (though benefits are substantially lower). Will Tesla feel any pressure to create decently paying jobs, or will it take advantage of a struggling area such as Reno, Nevada (one of the possible sites) or the low-wage, anti-union climate of Texas (another contender) to keep compensation levels low?

Fortunately, it is not entirely up to the company. The upside to the insistence on a big subsidy package by Tesla is that states attach some job quality standards to their awards. From this perspective, the best outcome would be for Tesla to choose Nevada, which ranked first in the rankings my colleagues and I at Good Jobs First did on state practices in this area.

Even if Elon Musk does not agree with Henry Ford’s famous wage boosting policy, he won’t be able to exploit his workers as thoroughly as he is doing to taxpayers.

Injustice Incorporated

Thursday, March 13th, 2014

Pages from pol300012014enIt’s been clear for a long time that oil drilling in Ecuador’s rain forests dating back to the 1960s caused severe environmental damage. Yet for more than two decades a lawsuit against the lead drilling company, Texaco, and its new owner, Chevron, has meandered through Ecuadoran and U.S. courts.

Chevron, fighting a $19 billion judgment against it in Ecuador (later reduced to $9.5 billion), has sought to turn the tables on the plaintiffs and their U.S. lawyer, Steven Donziger. Recently, a U.S. court ruled in favor of the company, bolstering its refusal to pay anything in compensation.

The challenges faced by the plaintiffs in the Chevron case are, unfortunately, the rule rather than the exception. It is often next to impossible to get a large transnational corporation to fully rectify serious environmental, labor or human rights abuses.

This frustrating reality is analyzed at great length in a new 300-page report from Amnesty International entitled Injustice Incorporated. The study begins with a primer on the relationship between corporations and international human rights law. Amnesty points out a key dilemma:

In some respects the corporate model is antithetical to the right to effective remedy; by admitting and addressing human rights abuses companies expose themselves to financial liability and reputational harm which shareholders (if not the directors and officers of the company themselves) see as entirely contrary to their interests.

Consequently, Amnesty points out, corporations tend to respond in ways that can compound the abuse: “deals with governments, denying victims access to vital information and using vastly greater financial means to delay and frustrate attempts to bring cases to court.”

Another problem highlighted by Amnesty is that large companies tend to be structured as a collection of separate legal entities whose liability is compartmentalized. While recognizing that it is not realistic to try to change this well-entrenched feature of corporation-friendly legal systems, Amnesty argues that “a counter-balance is needed to protect public interest and the international human rights framework.”

Amnesty amplifies its analysis through four detailed case studies. The first is the 1984 Bhopal catastrophe, in which a massive leak of toxic methyl isocyanate gas at a facility owned by a subsidiary of Union Carbide killed thousands and caused debilitating illnesses in tens of thousands more. Union Carbide paid what the victims considered grossly inadequate compensation while its CEO, with the help of the U.S. government, evaded extradition on criminal charges. Dow Chemical, which acquired Union Carbide in 2001, has refused to do anything more to help the victims.

The other situations examined in the Amnesty report are not as well known. The first is the Omai gold mine in Guyana, where the rupture of a tailings dam in 1995 spilled a vast quantity of effluent laced with cyanide and heavy metals into two rivers. The mining operation and the dam were run by Omai Gold Mines Limited, a company controlled at the time by Canada’s Cambior Inc. Soon after the accident, Cambior paid out modest amounts in compensation to local residents while vigorously contesting legal actions brought both in Guyana and in Canada. The company, which later merged with another Canadian firm, Iamgold, never paid out anything more.

Amnesty’s third case study deals with the Ok Tedi mine in Papua New Guinea, where for many years waste products were dumped into a river used by some 250 communities of indigenous people. In 1994 a lawsuit on behalf of local residents was filed in Australia, the home country of the company, Broken Hill Proprietary, which at the time was the primary operator of the mine. BHP, now part of BHP Billiton, eventually agreed to an out-of-court settlement that included the equivalent of $86 million in compensation but did not require it to build a long overdue tailings dam.

The final case study in the Amnesty report is also the most recent. In 2006 the Dutch oil trading company Trafigura signed a dubious agreement with a small firm in Ivory Coast that allowed it to dump petroleum waste products at various sites in the city of Abidjan. Thousands of residents exposed to the substances suffered from nausea, headaches, breathing difficulties, stinging eyes and burning skin. At least 15 were reported to have died. Trafigura reached a settlement that Amnesty labels as insufficient.

Amnesty finishes its report with an analysis of what it calls the three biggest obstacles in such cases: the legal hurdles to extraterritorial action, the lack of information needed to support claims for adequate reparations and the unwillingness of the governments of the countries involved to hold foreign corporations to full account. While offering a set of reforms aimed at alleviating these challenges, Amnesty harbors no illusions about the difficulty of bringing about such changes. Legal systems, it admits, exist primarily to protect powerful corporate interests.

Money for Something

Wednesday, December 14th, 2011

“To empower job-creators, we must get rid of regulations that prevent them from growing and hiring. This means taking decision-making power away from bureaucrats who don’t understand how job creation works.” Thus writes Newt Gingrich, who has revealed that one type of regulation he hopes to abolish are the child labor laws.

My colleagues and I at Good Jobs First have just issued a report which argues that the way to improve job creation is to impose more regulation.

In Money for Something we look at the economic development programs through which states spend billions of dollars each year in an effort to expand business activity inside their borders. These are the corporate tax credits, tax abatements, tax exemptions, cash grants, low-cost loans and other forms of financial assistance that states lavish on companies to lure one of the dwindling number of new plants, office buildings or distribution centers that the private sector is willing to construct in the USA rather than in China or India.

Unfortunately, many companies regard these benefits as a kind of entitlement and are willing to force states to bid against one another, driving the value of subsidy packages to unrealistic levels. A few years ago, for instance, German steelmaker ThyssenKrupp walked away with $1 billion for building a steel plant in Alabama that Louisiana also coveted.

Or else an established company demands new subsidies under the threat of relocating to another state. Sears has been playing this game shamelessly in Illinois. Two decades ago it got nearly $200 million to move its headquarters from downtown Chicago to a distant suburb. This year, as that deal was expiring, the company demanded new tax breaks from Illinois while it openly flirted with other states. The Illinois legislature has just approved a new $150 deal for Sears (along with breaks for other companies) amid protests that included the unfurling of a banner in the House Chamber reading “Stop Corporate Extortion.”

While the best choice might be to get rid of many of these subsidy programs, as long as they are in place they need to be made more accountable. When purported job creators are getting handouts of taxpayer money, we need to be damned well sure that they perform as expected.

In Money for Something, we evaluate 238 subsidy programs in all 50 states and the District of Columbia in two ways:

* Whether they impose a strict requirement on recipients to create a certain number of jobs

* And whether they make sure those are quality jobs by attaching wage and benefit standards to them.

We found that nearly 50 percent of the programs have no job-related performance requirements. States are spending more than $7 billion on these subsidies and have no guarantee that any job creation will result.

Many of the 103 programs without job creation requirements are designed to encourage investment. Left to their own devices, companies might focus that investment on labor-saving equipment that results in head-count reductions. There’s enough of that happening without using taxpayer funds to encourage even more.

The subsidy programs also leave a lot to be desired when it comes to job quality standards. Fewer than half have a wage requirement, and many of those are based on fixed amounts that can easily become outdated. We found one program in Delaware whose wage standard has for years been set at $7 an hour—a level that is now below the federal minimum wage. Other programs have standards that are only slightly above that federal minimum.

While it is clear that companies should not get subsidies to create sub-standard jobs (especially those that pay so little that workers would qualify for social safety net programs), that doesn’t take it far enough. Companies receiving subsidies should be creating jobs with wages that are significantly above market rates, thereby raising living standards. We found only eleven programs that do so.

State subsidy programs are even more deficient when it comes to benefits. Only 51 of the 238 we looked at require companies to make available health coverage of any kind, and only about half of those compel the employer to contribute to premium costs.

Even if all these standards are in place, they do not guarantee that a subsidy program’s benefits will outweigh its costs. Yet the presence of these safeguards gives public officials some recourse when a recipient’s performance is abysmal.

The question at that point is whether states are willing to enforce the standards they put in place. That is the subject of our next report at Good Jobs First, which will look at the use of clawbacks and other penalty procedures. Subsidy recipients that don’t create quality jobs need to feel the heat.

A Rogues Gallery of the One Percent

Thursday, October 13th, 2011

For the past 30 years, Forbes magazine has used its annual list of the 400 richest Americans as a platform for celebrating the wealthy. This year, amid the persistent jobs crisis and the growing challenge posed by the Occupy movement, the Forbes list has to be viewed in a different light. Rather than a scorecard of success, it comes across as a rogues gallery of the 1 Percent who have hijacked the U.S. economy.

Start with the overall numbers. Combined, the 400 are worth an estimated $1.5 trillion, up 12 percent from the year before. This at a time when both the net worth and annual income of the typical American household have been sinking. When the first Forbes list was published in 1982 there were only about a dozen billionaires. Today, every single member of the 400 has a ten-figure fortune. Their average net worth is $3.8 billion.

And where did this wealth come from? Forbes tries to justify the skyrocketing assets of the 400 by saying that “an alltime-high 70% are self-made…This is the working elite.” New riches may indeed be better than inherited wealth, but how did this “elite” climb the ladder of success?

The question is all the more pertinent, given the current inclination of conservatives to refer to the wealthy as “job-creators” as a way of rebuffing efforts to get the plutocrats to pay their fair share of taxes.

How much job creation can be attributed to the Forbes 400? In a chart on Sources of Wealth, the magazine notes that the largest single “industry” is investments, accounting for the fortunes of 96 of the 400. By contrast, manufacturing, which is more labor intensive, is listed as the source for only 17 of the tycoons.

Within the investments category, about one-sixth of the people in the top 100 made their fortunes from hedge funds, private equity and leveraged buyouts—activities that are more likely to result in the destruction than the creation of jobs. For example, Sam Zell (net worth: $4.7 billion) was ruthless in laying off workers after his takeover of the Tribune newspaper company.

Forbes no doubt would respond by pointing to the 48 people on the list who got fabulously wealthy from the technology sector. Yet many of these companies create very few jobs: Facebook, which made Mark Zuckerberg worth $17.5 billion, has only about 2,000 employees. Or, like Apple, which gave the late Steve Jobs a $7 billion fortune, they create most of their jobs abroad in low-wage countries such as China rather than manufacturing their gadgets in the United States. The same is now true for Dell—source of Michael Dell’s $15 billion fortune—which has closed most of its U.S. assembly operations.

The few people on the list who are associated with large-scale job creation in the United States got rich from a company known for paying lousy wages and fighting unions. Christy Walton and her immediate family enjoy a net worth of more than $24 billion deriving from the notorious Wal-Mart retail empire (other Waltons are worth billions more). The Koch Brothers ($25 billion) are bankrolling the effort to weaken collective bargaining rights and thereby depress wage levels, while satellite TV pioneer Stanley Hubbard ($1.9 billion) has been an outspoken critic of labor unions and was an aggressive campaigner against the Employee Free Choice Act.

Poor job creation performance and anti-union animus are not the only sins of the 400 and their companies. Some of them have a checkered record when it comes to other aspects of accountability and good corporate behavior.

Start at the top of the list. Bill Gates, whose $59 billion net worth makes him the richest individual in the United States, is known today mainly for his philanthropic activities. Yet it was not long ago that Gates was viewed as a modern-day robber baron and Microsoft was being prosecuted by the European Commission, the U.S. Justice Department and some 20 states for anti-competitive practices. In the 1990s there were widespread calls for the company to be broken up, but Microsoft reached a controversial settlement with the Bush Administration that kept it largely intact.

Today it is Google, whose founders Sergey Brin and Larry Page are estimated by Forbes to be worth $16.7 billion, that is at the center of accusations of monopolistic practices.

Amazon.com, headed by Jeff Bezos ($19.1 billion), has fought against the efforts of a variety of state governments to get the online retailer to collect sales taxes from its customers. By failing to collect taxes on most transactions, Amazon gains an advantage over its brick-and-mortar competitors but deprives states of billions of dollars in badly needed revenue.

Cleaning products giant S.C. Johnson & Son, the source of the combined $11.5 billion fortune of the Johnson family, recently admitted that it has used aggressive tax avoidance practices to the extent that it pays no corporate income taxes at all in its home state of Wisconsin. Forbes ignores this issue, but instead describes in detail the criminal sexual molestation charges that have been filed against one member of the family.

And then there are the environmental offenders, such as Ira Rennert ($5.9 billion.) His Renco Group was for years one of the country’s biggest polluters, and the Peruvian lead smelter of his Doe Run operation is one of the most hazardous sites in the world.

This is only a small sampling of the transgressions of the 400 and their companies. Rather than being hailed as job creators, they should be made to answer for their job destruction, their tax avoidance, their anti-competitive practices, their environmental violations and much more.  Rather than celebration, the Forbes 400 and the rest of the 1 Percent are in need of investigation.

A Not-So-Slow Boat to China

Thursday, August 25th, 2011

While U.S. political figures are wringing their hands about lackluster job creation, transnational corporations are desperately trying to hide their dirty secret: they are expanding their payrolls — just not in the United States.

The Washington Post recently published a front-page story about the fact that fewer and fewer companies are providing a geographic breakdown of their workforce in their annual financial statements, making it more difficult to track their hiring patterns.

They can get away with this because the Securities and Exchange Commission does not require this key bit of information in the mountain of data that publicly traded companies must include in filings such as their 10-K annual reports. Many companies that had chosen to report the breakdown voluntarily in the past are now deciding that the numbers are too sensitive to publish.

As the Post points out, quite a few of the non-reporters are companies that have been lobbying heavily for a special tax break on profits that they have been holding abroad for tax dodging purposes. A corporate front group called WinAmerica is arguing that a repatriation tax holiday would lead to an employment boon in the United States, even though a similar move in 2005 had no such effect.

What the Post article did not mention is that, while companies don’t have to disclose how many of their workers are based overseas, they do have to report how much of their non-financial “long-lived” assets are located abroad. This requirement stems from segment reporting rules established by the Financial Accounting Standards Board. The information is usually buried in the notes to the company’s financial statement.

Assets are a reasonable proxy for headcount in assessing the extent to which large U.S. corporations are placing more of their bets on foreign countries such as China and India rather than the US of A.

For a quick case study of asset exporting, I took a look at the financial statements of the publicly traded companies included on the list of supporters on the WinAmerica website. I examined the domestic/foreign split for assets in 2010 and compared it to that of a decade earlier.

Take the five big tech companies on the list: Apple, Cisco, Google, Microsoft and Oracle. From 2005 to 2010 their combined foreign assets grew by 329 percent, a rate more than one-fifth faster than the increase in their domestic assets. The most remarkable increase in foreign assets occurred at Google—a more than tenfold jump to $2.3 billion. Apple’s overseas properties increased fourfold to $710 million.

At some companies the portion of total long-lived assets held abroad is soaring. At Oracle, for instance, the figure last year reached 39 percent, up from 21 percent five years earlier.

High foreign assets levels are not limited to this group of tech giants. Pfizer has 43 percent of its assets outside the United States, Hewlett-Packard 45 percent and IBM has just over half. Even more remarkable is the case of General Electric: its foreign assets total $48.6 billion — nearly three times the $17.6 billion held at home.

GE is one of the dwindling numbers of large companies that provide a geographic breakdown of their workforce. Last year 54 percent of the company’s headcount was foreign-based — up from 42 percent a decade ago. During the ten-year period, GE added 62,000 employees abroad and only 2,000 at home.

Both in terms of their investment practices and their hiring patterns, companies such as GE have to a great extent given up on the United States even as they continue to cook up new schemes for tax breaks that will supposedly spur domestic hiring.

The trend has been long in the making. As early as the 1980s, GE made it clear it viewed itself as a global company not tethered to the U.S. In fact, the CEO at the time, Jack Welch, liked to say that, ideally, factories would be built on barges that could easily be moved from one country to another in quest of the lowest wages and weakest regulation. These days companies like GE don’t even consider docking their barges in the United States.

 

Targeting Target

Thursday, May 26th, 2011

Logo of the UFCW's Target campaign

The news of a union organizing drive at a group of Target Corporation stores in the New York City area raises the tantalizing possibility that the master of cheap chic may finally be knocked off its pedestal.

For years, Target has used its stylish image to obscure the fact that many of its employment and other practices are not significantly different from those of its scandal-ridden rival, Wal-Mart. It’s even managed to get itself included on a list of the “world’s most ethical corporations.”

Target’s stores, like those of Wal-Mart’s U.S. operations, are entirely non-union, and the company intends to keep them that way. The New York Times account of the organizing drive has Jim Rowader, Target’s vice president for labor relations, spouting the usual corporate rhetoric about how a union (the UFCW) would undermine the supposed trust that the company has built up with its workers. BNA’s Labor Relations Week (subscription-only) reports that Target is subjecting workers to captive meetings “conducted by store management in an attempt to dissuade workers from seeking union representation.”

Since no representation elections have been held yet, it is unclear whether Target will follow the lead of Wal-Mart in eliminating the jobs of those who dare to vote in favor of a union.

Target does not have a reputation quite as abhorrent as that of Wal-Mart when it comes to other employment practices, but neither is its record untarnished.  It has been accused of subjecting its largely part-time workforce to the same abuses—inadequate wages, restrictions on health coverage, overtime violations, etc.—seen among other big-box retailers. Though not as often as Wal-Mart, Target has shown up on lists prepared by state governments of the employers with the most workers or their dependents receiving taxpayer-funded healthcare benefits. Target has fought against living wage campaigns, most notably in Chicago in 2006, when it threatened to cancel plans for two new stores in the city unless Mayor Richard Daley vetoed a wage ordinance (which he did).

Target has also faced accusations relating to the treatment of minority applicants and employees. In 2007 the company paid a total of more than $1.2 million to settle cases brought by the U.S. Equal Employment Opportunity Commission involving alleged racial discrimination in hiring in Wisconsin and a racially hostile environment in Pennsylvania.

There have been controversies involving the treatment of workers by Target suppliers and contractors, as well.  In 2002 Target was one of a group of retailers that together paid $20 million to settle class-action lawsuits charging them with permitting sweatshop conditions at factories run by their suppliers in Saipan, part of the U.S. Commonwealth of the Northern Mariana Islands in the Pacific. A 2006 report by SOMO, a Dutch research center on transnational corporations, documented other instances in which Target garment suppliers were reported to be abusing workers and the retailer did little in response.

Target has a history of hiring janitorial contractors for its U.S. stores that tend to engage in rampant wage theft. In 2004 one such contractor, Global Building Services, paid $1.9 million to settle an overtime-violation case brought by the federal government on behalf of immigrant workers.  In 2009 another Target cleaning contractor, Prestige Maintenance USA, settled an overtime lawsuit for up to $3.8 million.

Labor practices are not the only area in which Target’s accountability record falls short. Earlier this year, the company had to pay $22.5 million to settle civil charges that its operations throughout California had violated laws relating to the dumping of hazardous wastes. Target has had a good record on gay rights, though last year the company found itself at the center of a controversy after it was revealed to have contributed to a business PAC which in turn contributed to a gubernatorial candidate in Minnesota who campaigned against gay marriage (among other reactionary positions).  Target later apologized.

And then there’s the matter of subsidies. Like Wal-Mart, Target has extracted lucrative tax breaks and other forms of financial assistance from many of the communities where it has built stores or distribution centers. One of its more audacious efforts was a proposal for a $1.7 billion mixed-use project in the Minneapolis suburb of Brooklyn Park, for which Target wanted more than $20 million in property tax abatements and a public contribution of $60 million for infrastructure costs. Despite seeking all this taxpayer assistance, Target demanded a waiver from the city’s living-wage policy for many contract and part-time workers who would be employed at the site.

Perhaps the best thing that can be said about Target, aside from its style, is that it is much smaller than Wal-Mart. Its total revenues are only about one-sixth of the worldwide sales (and less than one-quarter of U.S. sales) of the Bentonville behemoth. Target’s workforce of 355,000, all in the United States, is dwarfed by Wal-Mart’s domestic headcount of 1.4 million and another 700,000 abroad. Target thus has a much smaller impact on overall labor practices and the global supply chain.

What impact it does have is not salubrious. Now that it is facing some union pressure, let’s hope Target breaks from Wal-Mart and decides that it is makes sense to treat its workers with as much respect as its customers.

NOTE: Speaking of subsidies, the Subsidy Tracker database I created for Good Jobs First has just been expanded and now has more than 65,000 entries covering 154 subsidy programs in 37 states.

The $100 Million Stickups

Thursday, May 19th, 2011

According to the FBI, the typical bank robber escapes with about $7,600. It would take more than 13,000 such capers to reach the amount that some individual corporations are netting in their own holdups, though of a legal variety.

This year has seen a series of cases in which large companies secure big subsidy packages by hinting that they may move their corporate headquarters to another state, and in several instances those packages have turned out to be worth an eye-popping $100 million.

The fact that state and local governments around the country continue to face severe budgetary shortfalls has not prevented them from offering—and companies from taking—these huge payoffs. Here are some new members of the $100 Million Club:

Motorola Mobility Holdings—one of the two spinoffs from the split-up of the old Motorola Inc. earlier this year—recently extracted $100 million in EDGE tax credits from Illinois as the price for keeping its headquarters and approximately 3,000 employees in the Chicago suburb of Libertyville. EDGE credits normally apply to corporate income tax payments, but the state legislature allowed the smart-phone company to keep employee income tax withholding payments instead. Motorola Mobility was awarded several million dollars more in job training and other grants.

When Panasonic Corporation of America let it be known it was considering moving its headquarters out of New Jersey, the state offered the company a tax credit worth just over $100 million to stay. But it couldn’t remain at its existing site in Secaucus. The Urban Transit Tax Credit required a relocation, so the state’s Economic Development Authority got the Japanese electronics firm to agree to move a few miles down the road to Newark. The arrangement was expected to provide a big boost in tax revenue for Newark (money in effect poached from Secaucus), but the struggling city for some reason decided it was necessary to give back a portion of that to Panasonic in the form of more subsidies, the amount of which has not yet been determined.

After raising the possibility of moving out of state in response to an increase of one half of one percent in local income taxes, American Greetings agreed in March to keep its corporate headquarters in northeast Ohio. All it took was a state package of grants, tax credits and low-interest loans worth an estimated $93 million over 15 years. Once the greeting card company settles on the exact site, it is likely to get additional local assistance that will put its total subsidies above $100 million.

A few weeks after the American Greetings deal, ATM manufacturer Diebold, which had made similar noises about a possible move to another state, was also induced to keep its headquarters in northeast Ohio. It, too, is slated to get total subsidies of about $100 million—$56 million in refundable tax credits from the state and anticipated local “incentives” of more than $40 million.

Sears Holdings could soon join the club as well. Actually, Sears is already a leader in it. Back in 1989 it got a subsidy package of $178 million for moving its headquarters from downtown Chicago to exurban Hoffman Estates, 29 miles away. The state and local tax subsidies from that deal are set to expire next year. Playing the we-might-move-out-of-state game, Sears has set off a frantic effort by Illinois officials to extend the company’s subsidies for another 15 years. No deal has yet been announced.

It is frustrating to see one company after another get away with job blackmail. If only we could get the FBI to take an interest in this kind of stickup.

Challenging Corporate America’s Hiring Freeze

Thursday, March 3rd, 2011

You would never know it from the preoccupation with budget deficits and the attack on public unions, but there is still a severe jobs crisis in the United States.

The focus on the state and federal fiscal situation has deflected attention from what should be a major scandal: the failure of big business to accelerate hiring in step with the emerging recovery in overall economic activity.

In recent weeks the dimensions of that scandal have become increasingly apparent as corporations report lush earnings for 2010 while hiring remains depressed. To highlight this incongruity, I looked at the top 50 companies on the most recent Fortune 500 list. Twenty-nine of them have recently reported their annual profits while also disclosing the size of their payroll as of the end of the fiscal year.

On the earnings side, it is truly fat city. The 29 posted aggregate net income of $239 billion, a whopping 48 percent increase from the year before. Oil companies, of course, are raking it in. Exxon Mobil was up 58 percent and Chevron 81 percent. Service sector giants are also reporting much richer bottom lines. UPS showed an increase of 62 percent and AT&T 63 percent. Some blue chip industrials more than doubled their earnings. Boeing soared 152 percent and Ford Motor 141 percent.

By contrast, the employment figures are pitiful. Together, the 29 corporations reported a decline of about 3,500 positions in their aggregate head count of some 4.6 million. While most of the companies showed little change—and some banks increased their hiring a bit—a few of the corporate giants slashed payrolls. Telecommunications behemoth Verizon Communications reduced its workforce by 28,500 jobs while boosting its profits more than 13 percent. General Electric, whose CEO Jeff Immelt is advising the Obama Administration on job creation, got rid of 17,000 net positions during 2010 while enjoying a 6 percent rise in earnings. (GE is one of the few companies that provide a geographic breakdown of their workforce. In the U.S. GE’s head count was down by 1,000.)

It’s interesting that the percentage decrease in head count at Verizon and GE is almost identical to the percentage increase in profits at each of the companies.

Given these numbers, why is big business facing little criticism for its hiring freeze? There is a tendency to regard even large corporations as helpless in the face of economic conditions, and they are not expected to resume hiring until the market mandates it. Yet the overall economy is picking up and still there is a resistance to hiring.

Corporate apologists such as the U.S. Chamber of Commerce would have us believe that the reason is excessive workplace regulation. The Chamber has just come out with a report making the preposterous claim that if state governments would only curtail their employment rules to the lowest common denominator, 746,000 new jobs would magically materialize.

A major reasons hiring is anemic is that workplace rules—and union presence—are too weak rather than too strong. Companies can do more business and garner more profits without increasing their head count largely because there is nothing stopping them from squeezing more work out of the same number of employees. Stricter protections and more collective bargaining would result in higher employment levels.

One of the favorite policy prescriptions for high joblessness is to offer tax credits to companies to hire more people. The existence of those programs at the state and federal levels is, however, contributing little to job creation.

Rather than thinking up more incentives, perhaps there we should create a disincentive for corporations to continue their hiring boycott. There is a growing awareness these days that big business is not paying its fair share of taxes.  We could begin to address this problem by creating tax penalties for profitable companies that refuse to use their earnings to alleviate understaffing.

Pressuring corporations to do more hiring would not only improve life for the overworked employed and reduce the ranks of the unemployed. The additional tax revenue that comes in—whether from the penalties or the withholding paid by the newly hired—would also alleviate the state and federal fiscal crunch and make it easier for us to ignore those who insist that cutting the size of government is the solution to everything.

Tracking Corporate Traitors

Friday, October 8th, 2010

Not too many years ago, America was up in arms about offshore outsourcing. The news media were filled with reports of the wholesale migration of both white collar and industrial jobs to low-wage havens in Asia. The mood of panic was reflected in articles such as the March 2004 Time magazine cover story Is Your Job Going Abroad?

For most people these days, the outsourcing controversy has largely been forgotten or recalled only in the context of the new NBC sitcom situated in an Indian call center.  But for the folks at the AFL-CIO, offshoring is neither a laughing matter nor a thing of the past. The labor federation and its community affiliate Working America have just released both a report and a database showing that the corporate practice of shifting jobs from the United States to cheaper foreign locales is still a burning issue for American workers and the American economy.

The report cites evidence that the use of offshoring is expanding in corporate America, though many companies have learned to be more discreet about it. The true extent of the job migration is difficult to determine, the report notes, because federal statistical agencies such as the Bureau of Labor Statistics and the Bureau of Economic Analysis are not set up to measure this kind of phenomenon accurately.

For those less inclined toward policy briefs and more concerned about conditions in their community, the AFL and Working America also released a new version of their Job Tracker database. It allows one to plug in a Zip code and see a Google map with pushpins indicating workplaces that have experienced job flight, as indicated by WARN Act filings, Trade Adjustment Assistance certification and other data sources. Job Tracker also shows which workplaces have been hit with health and safety violations (from the OSHA database), labor law violations (from the NLRB database) and employment discrimination violations (from the database of the Office of Federal Contract Compliance Programs).

This is a great resource for researching bad employers, whether or not they are moving jobs offshore. The site also has a feature allowing a user to recommend a company that should be featured on Job Tracker. It would be great to see it expanded even more to cover other forms of regulatory violations as well as key data such as government contracts and subsidies.

The Job Tracker is handy for finding out how employers in specific locations export jobs, but it is also helpful to see aggregate figures for corporate behemoths. The AFL/Working America report mentions the case of IBM, whose U.S. workforce dropped from more than 40 percent of the company’s worldwide total in 2005 to just over a quarter in 2009.

IBM is far from unique. Based on figures from its 10-K SEC filings, the U.S. share of General Electric’s workforce dropped from 51 percent at the end of 2005 to 44 percent at the end of 2009. During the same period, the U.S. share at Caterpillar fell from 52 percent to 46 percent. Even at Wal-Mart, celebrated for creating American jobs (such as they are), the U.S. share declined from 72 percent to 67 percent. For many corporations it is not possible to measure the trend, given that they choose not to give a geographic breakdown of employment in their 10-K or annual report.

The tendency of large U.S.-based corporations to invest and create low-wage jobs abroad is not a new story. But the decision by such companies to expand employment overseas at the expense of U.S. jobs during a period of severe recession at home amounts to a form of economic treason. In this way, the Job Tracker is not just a database but also a corporate crime detector.

Shaming the Corporate Cheapskates

Thursday, July 15th, 2010

Buried among the many features of the financial reform bill passed by Congress is a provision that could get you a raise. For this to happen, however, you have to work for a large company that is uncomfortable with having it made public how little it pays its workers.

Section 953 of the Dodd-Frank bill deals with disclosures relating to executive compensation, not only at banks but at all publicly traded companies. One of the ways it seeks to rein in out-of-control CEO pay is by requiring firms to reveal how the amount paid to the head of the company compares to that received by the typical employee. The theory is that having this information made public would give pause to grasping CEOs and soft-touch board compensation committees.

The total compensation of chief executives (along with that of the four other highest paid executives) is already disclosed through the annual proxy statements companies have to file with the Securities and Exchange Commission (which makes them public through the EDGAR online system, where the documents are designated as DEF 14A). Yet there have been no requirements relating to the disclosure of how much is paid to the CEO’s underlings.

Section 953 fills this gap by instructing companies to include in their future proxies the median of the annual total compensation paid to all employees apart from the CEO. They also have to calculate the ratio of that median to the CEO’s total bounty.

Those ratios will be fascinating to see, but just as interesting will be the figures on non-CEO pay themselves. For the first time, we will be able to make direct comparisons of the broad compensation practices of different companies within given industries or across sectors. Getting official data from the companies themselves will be an improvement on the selective information that now gets posted on websites such as Glass Door.

There will be limitations, of course. Congress should have required the disclosure of data specifically on hourly workers rather than lumping them in with higher-paid professionals and executives. It would also be preferable to have separate numbers on domestic and foreign employees. And it is likely that companies will exclude low-paid temps and (often misclassified) independent contractors in making their calculations.

Yet this information could still be put to good use. Having clear, company-specific data could help stimulate a much-needed movement to address the problem of wage stagnation in the United States. The reality of that stagnation is quite evident from overall labor market data collected by the U.S. Bureau of Labor Statistics, but it would be much more effective to point the finger at individual companies with low medians and seek to shame them for failing to provide adequate compensation to their workers.

The ability of employers to keep wages low stems from two classic sources: low unionization and high unemployment. We know all too well the story of how anti-union animus on the part of employers has pushed the percentage of private sector workers with collective bargaining protections to historic postwar lows. To the extent they are able, unions target individual companies such as Wal-Mart, T-Mobile and (until it was finally organized) Smithfield Foods for denying their workers the right to representation.

Unions and other advocacy groups also criticize specific companies that engage in mass layoffs, especially when they seem to be undertaken mainly to impress Wall Street.

Yet we rarely hear criticisms of particular companies for failing to hire new workers when conditions seem to warrant it. The “economy” is assumed to be to blame for the high levels of joblessness afflicting us, not deliberate decisions by corporations to keep their payrolls artificially lean. Recently, the U.S. Chamber of Commerce made the absurd argument that overregulation is responsible for the anemic hiring situation. The Obama Administration responded by saying that weak consumer demand is the cause. Absent is the idea that corporations are failing in their responsibilities.

The unwillingness to chastise corporations is all the more bewildering in the face of growing evidence that business is hoarding cash instead of investing in job-creating ways. A front-page story in the Washington Post headlined COMPANIES PILE UP CASH BUT REMAIN HESITANT TO ADD JOBS notes that U.S. nonfinancial companies, buoyed by rising profits, are now sitting on $1.8 trillion in liquid reserves.

Why is there not more of an outcry about this behavior? Here’s an idea: pick companies with the most egregious combinations of rising profits and falling payrolls and press them to justify their boycott of U.S. workers. Once the new disclosure requirement kicks in, they could also be pushed to explain their low compensation levels. Business needs a strong reminder that it also exists to provide opportunities for people to earn a living.